An E&E Special Report

OIL AND GAS

Court considers Chevron's request for documents in Ecuador litigation

Lawrence Hurley, E&E reporter

Greenwire: Tuesday, April 17, 2012

A federal appeals court today seemed inclined to rule that a lower court judge acted too hastily in allowing Chevron Corp. access to documents prepared by a consulting firm working for Ecuadorean plaintiffs in a high-profile case that has dragged on for almost 20 years.

The oil giant wants documents from the Weinberg Group, a scientific consulting firm that the plaintiffs had hired to prepare a report on the alleged environmental damages in the eastern part of Ecuador.

Last year, a judge in Ecuador ruled that Chevron was liable for up to $18 billion for contamination caused by Texaco Petroleum Corp. Chevron acquired Texaco in 2001.

Chevron believes the Weinberg documents could help it in a racketeering case it has filed against the plaintiffs and their American lawyers.

But a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit appeared unconvinced that U.S. Magistrate Judge John Facciola correctly ruled that Chevron could get access to about 1,000 documents. The judges seemed to agree with the plaintiffs that Facciola did not correctly follow precedent in determining whether Weinberg should hand over the material.

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The judges strongly indicated they would remand the case to Facciola but would likely not dismiss it altogether, as the plaintiffs hope.

Today's argument was a sideshow to a legal battle that is playing out in various venues around the world.

In an effort to undermine the Ecuadorean court's judgment, Chevron has alleged that the plaintiffs committed fraud, going as far as to file the racketeering suit in New York.

As part of that strategy, Chevron has sought to question as many people as possible, including Steven Donziger, the American lawyer who masterminded the effort to sue the oil company in Ecuador.

The Weinberg Group is another target. It claims that it should not have to hand over documents because it is covered by the attorney-client privilege.

But Chevron maintains, as did Facciola, that the privilege is trumped by what is known as the "crime-fraud exception" that forces production of documents if there is evidence that a crime or fraud took place.

Weinberg was hired by the plaintiffs after Chevron attacked the credibility of the Ecuadorean court-appointed scientific expert, Richard Cabrera. The consulting group's job was to bolster the plaintiffs' case by rounding up new experts to weigh in on the evidence of environmental damage.

Among Weinberg's arguments is the claim that Facciola inappropriately deferred to the findings of the judge in the Southern District of New York, Lewis Kaplan, who is overseeing the racketeering case and consistently ruled in favor of Chevron.

In March 2011, Kaplan issued an extensive opinion in which he granted Chevron's request for an injunction that would have prevented the plaintiffs from enforcing the Ecuadorean judgment in U.S. courts. On appeal, the 2nd U.S. Circuit Court of Appeals lifted the injunction, saying it had been imposed prematurely.

James Tyrrell, the Patton Boggs attorney representing Weinberg in court today, seized on the 2nd Circuit's decision, noting that Facciola made no independent findings of fact on which to base his decision.

Chief Judge David Sentelle noted that all of Facciola's findings were "intertwined" with the recitation of facts in Kaplan's opinion.

He also said that most judges would have taken a look at the documents to gauge their relevance.

"Wouldn't that have been a nice thing for the judge to have looked at?" he said.

Likewise, Judge Brett Kavanaugh asked whether it would be "prudent" to remand the case because Facciola's findings were "heavily, if not completely, influenced" by Kaplan's opinion.

Questioning Facciola's approach, Judge David Tatel pointed out that under court precedent, the magistrate judge was required to make a finding that the Weinberg documents were created "in furtherance of a fraud," which he failed to do.

"Our cases are very clear about that," Tatel said.

The ongoing tussle in the racketeering case is just one strand of a tangled web of litigation over the $18 billion judgment.

Chevron's final appeal in Ecuador is currently before that nation's highest court while, separately, an international arbitration panel is considering a 2009 claim brought by Chevron against Ecuador in which the oil company claims the Andean nation violated a bilateral trade agreement between it and the United States (E&ENews PM, Feb. 28).

The case is infamous in part because of the now notoriously frosty relationship between the opposing parties, which Sentelle referenced when asking them to focus on the legal issues.

"We have heard the vitriol that both sides want to spill on each other," he said.